In the commercial real estate sector, Environmental, Social, and Governance (ESG) programs are no longer optional considerations—they’re essential business drivers. For both firms managing multiple properties and large corporate brands, strong ESG performance increases access to funding, improves asset value, and offers other secondary benefits.
As a result, the momentum behind ESG in the real estate industry continues to grow, with over 80% of institutional investors now considering ESG factors in investment decisions. This creates both pressure to act and opportunities to stand out by taking clear steps toward sustainability and accessible approaches to reporting.
While brands have many options, solar is the simplest and most financially-beneficial avenue to accomplish ESG goals. With both environmental and economic incentives, plus zero-cost options for adoption, it’s a natural first step in any multi-property ownership group’s ESG strategy.
But how exactly does solar affect ESG, and how can it become a scalable tactic across a portfolio? Here’s why ESG matters, and how solar can do the heavy lifting for commercial REITS and brands:
Why ESG Strategy Matters to Larger Property Ownership Firms
Because ESG strategy affects how properties are valued, managed, and financed, it’s creating a fundamental shift in the industry. Properties with strong environmental programs are worth more—about 10-21% more on average—and also see increased tenant retention and stronger internal data.
But it’s bigger than creating value, ESG future-proofs business models. A strong ESG strategy increases marketability, attracts investors, and satisfies new regulations by satisfying:
Marketing and Tenant Expectations
Leasing market competition can be fierce, and today’s tenants want sustainable buildings. For property owners, this means environmental performance directly affects their ability to attract and keep quality tenants. Many commercial tenants look for green features when choosing new space, with around 40% looking specifically for green leases. These prospective tenants likely have their own ESG goals, and making a property level strategy a key factor in their leasing decisions.
From industrial warehouses to commercial retail spaces, this shift affects even the most diversified portfolio. National retailers often pay premium rents for spaces that align with their environmental commitments. Local businesses increasingly follow suit, recognizing that consumers care about environmental impact.
In addition, many major retailers now require sustainability features in their lease agreements. Companies like Target, Walmart, and Whole Foods actively seek properties with renewable energy options. Industrial tenants, especially in the logistics and manufacturing sectors, prioritize properties that help them meet corporate environmental goals.
Investor Relations Requirements
Because it’s directly tied to financial performance, a strong ESG strategy speaks volumes to investors. In today’s market, strong environmental programs protect property value and open doors to better financing.
Investment firms check ESG performance through multiple metrics, better loan terms, and greater valuations for higher scores. They look at energy efficiency, renewable energy use, and carbon emissions. They even factor in green building certifications like LEED.
On the other hand, poor ESG performance costs real money. Properties with weak environmental programs pay up to 1% more in interest rates on loans. This single percentage point difference on a $10 million loan could mean $100,000 in extra costs every year.
Agency Reporting Requirements
Property owners also face increasing regulatory requirements from the board, and need to track and report their environmental impact more carefully than ever. This has led to the creation of independent organizations that validate ESG performance data and set peer benchmarks for investors and managers.
The largest of these entities, GRESB, or the Global Real Estate Sustainability Benchmark, sets the standard for measuring ESG performance in real estate. Over 1,500 property companies follow GRESB guidelines because investors trust and require these reports.
GRESB looks closely at how buildings, and their tenants, use energy. Property owners must track both their buildings’ direct energy use (Scope 2 emissions) and their tenants’ energy consumption (Scope 3 emissions).
A typical building needs to report hundreds of data points each year, making comprehensive reporting strategies an essential element. With multi-tenant energy usage across a portfolio, sound ESG decisions can streamline the necessary documentation for these groups.
How Solar Benefits Commercial Property Portfolios
Whether driven by environmental metrics or simple economics, these ESG mandates naturally drive interest in solar. Commercial properties, with their large flat roofs, are well-suited to access the benefits of solar, and certain agreements, like solar leases, allow ownership groups to unlock these advantages at no cost.
With solar, both industrial warehouses and shopping malls alike can generate renewable energy on-site, providing direct sustainability benefits. Because the solar from the array substantially decreases the building’s reliance on grid energy, owners see a dramatic decrease in their carbon footprint, and lower scope 3 emissions from their tenants.
When structured as a lease, this solar output also provides incremental rent to property owners and energy savings to tenants. These agreements pay monthly roof rent in exchange for unused space for the solar system. In turn, the lessee provides the energy at a discounted rate to tenants.
As a part of an ESG strategy, solar also saves another valuable commodity—time. Its quick implementation time and dramatic impact make solar the most cost-effective and quantifiable way to show rapid sustainability progress.
Because ownership can implement solar at no cost, it’s one of the most cost-effective and least labor intensive ways to move ESG goals forward.
ESG Reporting—What is Involved?
While reporting on ESG strategies can be convoluted, a central component like solar, combined with new reporting tools, makes tracking environmental impact straightforward.
Solar programs connect directly to standard systems like Energy Star Portfolio Manager, automatically recording energy production and environmental benefits. This integration eliminates manual data entry and ensures accurate reporting of sustainability metrics across a portfolio.
Solar also integrates flawlessly with some of the more robust software on the market, like Measurabl. These popular reporting platforms help property owners turn complex sustainability data into clear reports. They often track energy production in real time and show sustainability progress across entire property portfolios. Property owners can also generate custom reports for different audiences, from investors to marketing teams.
With a solar lease program, tracking both building and tenant energy use is simple. They utilize modern billing systems, like OneBill, showing exactly how tenants use energy and helping property owners report accurate environmental impact numbers that investors require. These platforms track key metrics like peak usage times, seasonal variations, and overall consumption patterns.
Marketing and Investor Relations Benefits
It’s no secret that investors expect results, and solar programs give property owners clear results to share. Unlike many green initiatives that take years to show impact, solar installations these benefits are immediate and measurable.
Properties with solar often score higher in sustainability rankings, helping them stand out in a competitive market. For owners with multiple properties, this progress helps attract and keep environmentally-conscious tenants, like national retailers with their own goals, across their entire portfolio.
Solar programs also tell a compelling story to investors. They show both environmental benefits and direct financial returns through increased property income. When presented to investment committees, solar programs demonstrate concrete action on ESG goals—while improving Net Operating Income and property value in the process.
With both ESG strategy and financial-benefits in mind, the ability to add solar with no upfront cost through a lease makes these programs particularly attractive. Property owners can advance their sustainability goals while focusing their capital on core business needs. This approach has proven especially effective for REITs and large portfolio owners who need to show ESG progress across multiple properties quickly.
For commercial property owners and national retailers looking to strengthen their ESG programs, solar offers a clear path forward. It delivers measurable environmental impact, simple reporting, and direct financial benefits—making it a smart addition to any multi-property ESG strategy.
Looking for an ESG strategy that will also boost property value?
Contact King Energy for a personalized solar proposal.